Chancellor George Osborne set out a four-year plan of cuts today which he said would drag the country “back from the brink”.

Unveiling a comprehensive spending review which could result in almost half a million job losses over four years, Mr Osborne said: “Tackling this budget deficit is unavoidable.”

The Chancellor told MPs: “Today’s the day when Britain steps back from the brink, when we confront the bills from a decade of debt.”

And he added: “To back down now and abandon our plans would be the road to economic ruin. We will stick to the course. We will secure our country’s stability. We will not take Britain back to the brink of bankruptcy.”

On the job losses that will result, Mr Osborne confirmed that the Office for Budget Responsibility had estimated that 490,000 could go over the four years.

But he sought to reassure the public, saying: “Much of it will be achieved through natural turnover, by leaving posts unfilled as they become vacant. Estimates suggest a turnover rate of over 8% in the public sector.

“But yes, there will be some redundancies ... that is unavoidable when the country has run out of money.

“We feel responsible for every individual who works for the Government, and we will always do everything we can to help them find alternative work.

“In fact, in the last three months alone the economy created 178,000 jobs.”

Mr Osborne indicated that even the Queen was doing her bit.

He said she had agreed to a one year cash freeze in the Civil List for next year.

He added: “Going forward, she has also agreed that total Royal Household spending will fall by 14% in 2012/13 while grants to the Household will be frozen in cash terms.”

The chancellor announced that people would have to work longer before they get their state pension.

He said the state pension age for men and women will reach 66 by the year 2020 - four years sooner than previously expected.

He said this would involve a gradual increase in the state pension age from 65 to 66, starting in 2018.

The move would save over £5 billion a year - “money which will be used to provide a more generous basic state pension as we manage demographic pressures”, said Mr Osborne.

The Chancellor pointedly observed that Gordon Brown was not in the Commons today.

He said “How ironic that it was the last Labour Prime Minister himself who once observed that the ‘public finances must be sustainable over the long term. If they are not then it is the poor ... that will suffer most’.”

Mr Osborne added: “That’s why we are restoring order to our public finances before that is allowed to happen.”

As expected Mr Osborne confirmed that spending on the NHS, schools and overseas aid would be ring-fenced.

But he said spending on police would fall by 4% each year.

However, he added: “By cutting costs and scrapping bureaucracy we are saving hundreds of thousands of man hours. Our aim is to avoid any reduction in the visibility and availability of police in our streets.”

Overall, the Home Office budget will fall by an average of 6% a year. The Ministry of Justice’s budget will be cut by 6% a year. And the Law Officers Department will reduce its budget by a total of 24% over the four years, with the Crown Prosecution Service “greatly reducing its inflated cost base”, Mr Osborne said.

Savings of 24% in the Foreign and Commonwealth Office budget were also announced.